“Here’s this [market] that is huge, that is really important, that needs innovation, and there’s just nothing out there to sort of foster it,” said Doug Lynch, vice dean of Penn’s Graduate School of Education. “Let’s create a Silicon Valley around education.”

K-12 schools and degree-granting institutions spend more than $1 trillion on education annually, federal statistics show. That represents immense potential for entrepreneurs—if they can resist the lure of more established tech firms and trendier ventures like social networks.

There also are other roadblocks.

Despite constant talk of making U.S. students more competitive, Lynch said it can be nearly impossible to introduce a new product in the fractured K-12 market because of frequent changes in superintendents, policy, and curricula. Each of the nation’s 15,000 school districts has its own needs and often cumbersome purchasing process.

“It’s worse than trying to sell to the U.S. Army, in terms of the hoops you have to jump through,” Lynch said.

The incubator he envisions at Penn—called NEST, for Networking Ed-entrepreneurs for Social Transformation—would identify promising businesses and give them financial and logistical support, such as access to capital, work space, and university expertise.

Linking educational researchers, who tend to be theoretical, with entrepreneurs, who are more practical and action-oriented, could help unlock the market, said Kim Smith, co-founder of the NewSchools Venture Fund, which invests in education businesses.

“If they can figure out a way to bridge those two communities, it could be a real contribution,” said Smith, now CEO of Bellwether Education Partners.

Penn, an Ivy League university in Philadelphia, has already held two summits on education entrepreneurship and hosted its first business plan competition, sponsored by the school and the Milken Family Foundation.

The top prize went to Digital Proctor, which creators say can identify typists through keystroke biometrics and thereby make it easier for teachers to root out test fraud. Digital Proctor beat out competitors from 27 states and three countries to win $25,000.

In an interview, Digital Proctor CEO Shaun Sims said investors’ lack of familiarity with the education industry means entrepreneurs must make a double pitch: first on the market overall, then on the actual product they’ve developed.

An incubator would “create an ecosystem for education” that attracts entrepreneurs who might otherwise venture into more investment-friendly efforts, he said.

“You’re going to get the country’s best talent working in this market instead of going to Silicon Valley working on the next social network,” Sims said.